The sale by Iberdrola of most of its electricity generation assets in Mexico to the State for 6,000 million dollars (5,500 million euros) will “free” the Spanish company from “regulatory problems” in the country and will allow it to allocate more resources to the United States and Europe, affirmed today the financial director of the group, José Sainz, in a meeting with analysts to discuss the operation.
“Most of the regulatory problems were in the transferred assets. The problems go with the assets, so we are now almost free of problems with the Mexican government,” Sainz said.
Iberdrola has been at the center of criticism directed by the Mexican president, Andrés Manuel López Obrador, for months at the multinationals that operate in the country, and the chief executive of the electricity company in the region, Enrique Alba, had already warned that The United States offered greater “legal and regulatory certainty.”
Sainz has indicated that, of the 8,436 megawatts (MW) sold by Iberdrola in the operation, the majority, more than 7,000, are part of government concessions that begin to expire as of 2027. Apart from a wind farm in operation since As of 2012, there are twelve combined gas cycle plants, the oldest of which is Monterrey, which has been operating since 2002.
“We entered a new phase of the relationship with the Mexican government, which was very interested in buying these concessions. They were very important to them. This operation obviously changes relations for the better and gives us opportunities in the country,” said the manager.
Iberdrola says it will be “delighted to invest in Mexico after the agreement,” but offers no concrete plans. “We will see how the situation in Mexico evolves in the coming months,” added Saiz. The next presidential elections will be held in 2024.
What the company has announced is that the resources obtained from the sale will be used to grow in the United States and Europe. Its objective is to bet on countries with a good credit rating, as indicated in its presentation.
In Mexico it will maintain 2,400 megawatts of renewables, gas cycles and cogeneration, in addition to the marketing business. It has a portfolio of renewables for the potential development of another 6,000 MW and is confident that “a better relationship with the Mexican government will allow us to look for opportunities to grow.”
The Mexican Government has informed that, with the agreement, the State increases to 55% of the total electricity production in the country, compared to the current 39%, thus exceeding its objective of reaching 54%. There are some regions where it will reach percentages above 95%.
The purchase was made by the public infrastructure manager MIP, but the intention is for the country’s regulatory body, the Federal Electricity Commission (CFE), to be in charge of the operation of the thirteen plants. The Mexican government has thanked Iberdrola for its “flexibility and good disposition.”
Iberdrola does not believe that the operation will have a significant effect on its dividend plan, but it will help to improve its debt ratios. “We have improved our financial strength,” the group’s head of global development, David Mesonero, told analysts.
The operation, it indicates, will foreseeably close before the end of the year and will serve to give strong support to its asset rotation plans planned until 2025. Of the megawatts sold, 60% are older than 16 years.
The assets sold, especially the combined cycles, are part of the infrastructure development plans with which the Mexican Government renewed its generation park several years ago. At that time, Iberdrola took advantage of the opportunities and became one of the benchmark electricity companies.
The group chaired by Ignacio Galán has opted in recent years for the development of electricity and renewable networks, with special emphasis on the United States, the United Kingdom and Brazil. Among the gas assets sold in Mexico are some of the largest plants of this type in the country.
